SEC and DOJ accuse social media influencers of alleged 0 million fraud schemes

SEC and DOJ accuse social media influencers of alleged $100 million fraud schemes

SEC and DOJ accuse social media influencers of alleged 0 million fraud schemes

The seal of the United States Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, DC on May 12, 2021.

Andrew Kelly | Reuters

Federal prosecutors and the Securities and Exchange Commission have charged seven social media influencers with using Twitter and Discord to commit securities fraud that netted them more than $100 million in ill-gotten gains.

The separate criminal and civil complaints also accuse another influencer of aiding and abetting the plan, authorities said Wednesday.

The seven accused of securities fraud used social media platforms to manipulate publicly traded stocks in a pattern that dates back to at least January 2020, the SEC said. Through widely followed Twitter accounts and stock trading chat rooms on Discord, the defendants allegedly “promoted themselves as successful traders,” according to an SEC news release, and allegedly encouraged followers to buy stocks that they also bought.

But they did not disclose to their followers while promoting those stocks that they planned to subsequently sell shares once prices or trading volumes increased, according to the complaint. The influencers allegedly made a profit by raising stock prices and then selling once they rose, making about $100 million in total, the SEC says.

Justice Department graphic detailing the defendants in the alleged pump and dump scam.

Department of Justice

Each of the defendants had well over 100,000 Twitter followers as of this month, the complaint said. One such account, @PJ_Matlock, run by Texas resident Perry Matlock who calls himself the CEO of Atlas Trading, no longer exists as of Wednesday. The other principal defendants charged with securities fraud (and their Twitter handles) are Edward Constantin (@MrZackMorris), Thomas Cooperman (@ohheytommy), Gary Deel (@notoriousalerts), Mitchell Hennessey (@Hugh_Henne), Stefan Hrvatin (@ LadeBackk) and John Rybarcyzk (@Ultra_Calls).

Daniel Knight (@DipDeity) has been accused of aiding and abetting the alleged scheme, in part by hosting a podcast promoting some of the main defendants as expert traders. The SEC said Knight also negotiated with the other defendants and saw profits from the scheme.

Some of the defendants’ Twitter bios include disclaimers as of at least Wednesday that appear to seek to mitigate their legal risks. For example, Constantin’s account says “All my tweets are just my opinions. I’m not a financial advisor yet. Parody account.” Hennessey says: “Everything is my opinion. I actively trade positions. I’m not a professional, I’m not a financial advisor, I probably do the opposite.” Rybarcyzk reads “DISCLAIMER: My tweets are NOT advice to take action. – Ideas shared on Twitter are NOT buy or sell signals. DO NOT TRADE BASED ON SOCIAL MEDIA.”

Knight’s bio says, “don’t buy/sell my tweets EVER”.

The eight also face criminal charges from the Justice Department’s Fraud Branch and the United States Attorney’s Office for the Southern District of Texas.

Twitter and Discord did not immediately respond to requests for comment.

Three of the influencers accused of the scheme who had opened Twitter direct messages, Deel, Rybarcyzk and Knight, did not immediately respond to CNBC requests for comment. Messages sent to Instagram accounts that appear to be linked to Matlock, Constantin and Cooperman did not receive an immediate response. A message to a LinkedIn account that appeared to be connected to Hennessey did not immediately respond to a request for comment. The contact information for Hrvatin could not be found immediately.

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